Henrico’s triple AAA bond rating reaffirmed, despite economic slowdown

County earns 1.49% interest rate – lowest on record – in last sale from 2016 bond referendum

Henrico County has sold its last set of general-obligation bonds to support capital-improvement projects identified in the 2016 bond referendum.

With the $121.4 million sale on June 16, the county had its triple AAA bond ratings reaffirmed and earned its lowest interest rate on record, 1.49% for the 20-year bonds.

“This interest rate is significantly better than our previous low rate of 1.96% from last August and it validates Henrico’s reputation for strong fiscal management, even in challenging times,” County Manager John A. Vithoulkas said. “Along with the reaffirmation of our triple AAA bond ratings, this low interest rate will allow us to provide our residents with new and improved facilities while saving millions of dollars in costs over the next two decades.”

Proceeds from the bond sale will be used as follows:

  • $57.9 million for school projects, including the new J.R. Tucker High School, the new Highland Springs High School and a renovation of Adams Elementary School;
  • $8.2 million for improvements to Richmond-Henrico Turnpike;
  • $12.2 million for a new firehouse for the Eastgate/New Bridge area; and
  • $43.1 million for recreation and parks facilities, including Taylor, Cheswick, Three Lakes and Tuckahoe Creek parks and turf fields at various high schools.

The sale was the fourth and final one from the county’s 2016 bond referendum, which is providing $418.9 million to reinvest in new and improved capital facilities. Voters overwhelmingly approved bond debt of $272.6 million for schools, $87.1 million for parks, $24 million for libraries, $22.1 million for fire facilities and $14 million for roads.

The national economic slowdown caused by the COVID-19 pandemic has generated extra scrutiny of municipalities that are looking to tap the bond market.

The three main debt-rating agencies are now requiring updated fiscal and economic information to ensure a municipality’s previous bond ratings are justified, County Manager John A. Vithoulkas told the Board of Supervisors in a June 10 letter.

As a result, Henrico officials provided updates on the county’s current and upcoming fiscal years as well as details of actions taken by the Board of Supervisors “to combat and mitigate the spread and economic impact of COVID-19 in Henrico County,” Vithoulkas said.

To offset anticipated losses in revenue, Henrico eliminated $99 million in planned expenses for fiscal 2020-21. The cuts meant delaying capital projects that were to be funded with cash. Capital projects associated with the 2016 bond referendum remain on schedule.

Based on the update, the rating agencies – S&P Global Ratings, Moody’s Investors Service and Fitch Ratings – “strongly reaffirmed” Henrico’s AAA bond rating with a “stable” outlook, he said.

In a news release, S&P Global Ratings said, “Henrico County’s extensive and well-integrated financial management and long-term planning have enabled it to produce a strong track record of effective and conservative budgets.”

Moody’s Investors Service said Henrico’s “stable outlook reflects the likelihood that the county’s tax base and resident income levels will continue to improve and that reserves and liquidity will remain stable due to management’s conservative budget assumptions and formal fiscal policies.”

Fitch Ratings cited Henrico’s “high fundamental financial flexibility and resilience to cyclical economic stress” and noted that “Fitch expects the county to manage through near-term fiscal pressures from the economic slowdown caused by the coronavirus pandemic.”

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